The repo man is being watched: The government agency that protects consumers from predatory lending said Monday that it’s cracking down on lenders that seize vehicles illegally or otherwise break rules by doing things like keeping sloppy records or even holding personal property left in repossessed cars for ransom.
The stakes in the auto repossession market these days are high because of skyrocketing prices for cars and trucks, both new and used, the Consumer Financial Protection Bureau said. Because of a global shortage of computer chips used in manufacturing, cars are a lot more expensive than they were, making repo a lucrative activity for lenders who can sell a repossessed car for a handsome profit.
Prices for used vehicles have soared 40.5% in the past year, according to the latest government inflation data, and that’s pushed buyers deeper into debt, a recent report from the New York Fed showed. The bureau said it’s trying to make sure lenders play fair and will use its powers, including enforcement, to make sure they do.
Already the agency has found lenders who wrongfully repossessed vehicles from borrowers who had agreed to payment extensions or who even had fully caught up on payments. In other cases, loan servicers recorded borrowers as being behind on their payments when in fact they weren’t, or unlawfully made people pay to reclaim personal items that were left in repossessed vehicles.
The bureau said it’s worried rising car prices will give lenders all the more reason to engage in such abuses.
“With today’s high car prices, auto lenders and investors might be tempted to seize vehicles for resale in the hot used car market,” said Rohit Chopra, the bureau’s director, in a statement. “No American ever wants to wake up to see their car stolen. Auto loan servicers need to ensure that every repossession is lawful.”
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